Correlation of top energy ETFs with crude oil and natural gas
Among the top energy ETFs that track oil and gas–related companies, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) had the highest correlation of 64.4% with US crude oil (USO) (UWTI) in the last one month ending May 12, 2016.
The Energy Select Sector SPDR ETF (XLE), the Alerian MLP ETF (AMLP), and the VanEck Vectors Oil Services ETF (OIH) had correlations of 63.3%, 44.8%, and 60.6%, respectively, with US crude oil in the last month, as shown in the above table.
Over the last three months, XOP had the highest correlation of 64.9% with US crude oil. Continental Resources (CLR), RSP Permian (RSPP), Diamondback Energy (FANG), Halcon Resources (HK), Synergy Resources (SYRG), and Kosmos Energy (KOS) are some of XOP’s constituents.
XLE, AMLP, and OIH had correlations of 63.6%, 58.9%, and 61.6%, respectively, with US crude oil over the past three months, as shown in the above table.
Interestingly, AMLP’s correlation with crude oil in the last month has dipped compared to the last three months. On the other hand, the correlations of AMLP and OIH with natural gas (UNG) (BOIL) have surged significantly over last month compared to the last three months. In the last month, natural gas futures fell 0.4%, while ETF prices were range bound.
All the ETFs discussed above are comparatively more correlated to crude oil than to natural gas. Therefore, crude oil is the key driver for these energy ETFs.